Law Firms From U.S. Invade Paris

Wednesday

Jul 25, 2007 at 5:16 AM

A quiet revolution is under way, as European law firms are struggling to adapt to successive waves of their British and American counterparts.

PARIS, July 23 — Jean-Pierre Martel says his most memorable experience with American lawyers came a few years ago when his firm, Rambaud Martel, joined an American law firm to represent a European company preparing to sell shares on the stock exchange.

Every morning the phone rang, said Mr. Martel, 63, a founder of the French firm. A partner at the American firm would shout over the line, “Run to court, Jean-Pierre! Run to court!” Mr. Martel recounted. “And I would say, ‘No, that’s not the way we do that.’ ”

Mr. Martel won the case anyway, using softer legal tactics more common to Paris than New York. “In the office,” he said with a laugh, “we called him Mr. Run-to-Court.”

The discordance is part of a quiet revolution among European law firms struggling to adapt to successive waves of British and American law firms as Europe opens its market for legal services.

Last year, Mr. Martel’s firm split in two, with half the lawyers joining with the Paris office of Orrick, Herrington & Sutcliffe, of San Francisco.

One year later, the merged firms field about 100 lawyers in Paris, though Ralph Baxter, Orrick’s chairman, says the next 18 months will bring “more dramatic growth than in the past year.” When Orrick moves to new premises later this year, he adds, there will be room for at least 150 lawyers.

A decade ago, British firms like Freshfields and Linklaters changed some of the European landscape for lawyers. But the smaller, more nimble American firms have taken the lead in recent years.

The growth has been driven by the boom in corporate law accompanying waves of mergers and acquisitions. As of July, the value of European mergers and acquisitions totaled $1.38 trillion, according to Thomson Financial, compared with $1.58 trillion for all 2006. The 10 leading law firms consisted of five from the United States, headed by Sullivan & Cromwell and Skadden, Arps, Slate, Meagher & Flom, and five British firms, led by Allen & Overy and Clifford Chance.

Not surprisingly, these inroads are sowing tensions among local firms, as the Americans with their deep pockets and aggressive plans have sought to merge with local firms or, failing that, buy away top partners. Last year, Reed Smith of Pittsburgh merged with Richards Butler of Britain; in 2004, Piper Rudnick of the United States merged with DLA of Britain.

Some governments are troubled by the incursion of American firms, the English they speak and the practices of common law they bring. Three years ago, the French government organized a series of discussions in Paris and Washington on the value of the Napoleonic Code, after the Harvard economist Andrei Schleifer argued in a study that the language of finance was increasingly becoming English, and the legal backbone of finance was increasingly the common law.

The next jolt to Europe’s legal system may come from Britain, where Parliament is expected to enact a law this year enabling law firms to sell shares on the stock market. Australia has already taken the step, and in May, Slater & Gordon, in Melbourne, became the first law firm to be listed on the Australian stock exchange.

“The jury is out on what will happen,” to the legal industry, said Jeremy Black, who follows law firms at Deloitte & Touche in London. “There is a wall of money in the investment community,” he added, “and law firms are intelligent people.”

Firms with sizable war chests, he said, could drive aggressively overseas, though some countries on the Continent, most notably Germany, have already said they would not welcome such listed firms.

Some European law firms have reached out to American partners for financial expertise. When the British firm Rowe & Maw merged in 2002 with Mayer Brown & Platt of Chicago, it gave Rowe access to the Continent, since one year earlier Mayer Brown had acquired the law firms Lambert & Lee, of Paris, and Gaedertz of Frankfurt.

“But it also gave us a financial practice of some 250 to 280 lawyers,” said Paul Maher, a former partner at Rowe & Maw who is now vice chairman of Mayer Brown. “If you decide to be a big beast in the jungle,” he said, “you are constantly seeking to find economies of scale.”

To grow, some American firms are stalking prey in France. In 2003, the San Francisco firm Paul Hastings reinforced its position in Paris by acquiring Moquet Borde & Associés, a French firm with 55 lawyers.

Others seek organic growth. Davis Polk of New York has been in Paris for decades, and by the late ’80s had about 30 lawyers in Paris, mostly Americans. Five years ago the number had dwindled to three or four, but by this year it had climbed back to 14, mostly French. Margaret E. Tahyar, a Davis Polk partner, says the firm “is in a growth phase,” hiring mainly French lawyers, though she will not say how many. “It’s a big market, a global market, and there are global companies here,” she said. “So we will be expanding.”

French law practice has been by tradition modest and discreet. Even some of the larger firms, like Darrois Villey, have no Web site, considering it unprofessional. The reaction to the Americans and British has been varied.

Some French firms have sought “best friends” relationships with British or American firms. For a decade, Bredin Prat, a leading firm in Paris, has had such a link with the British firm Slaughter & May, which in turn has best friends across the Continent, preferring them to mergers or acquisitions. “It’s a question of getting the plumbing right,” said Andrew McClean, 41, a Slaughter & May partner in Paris.

The partners are part of a vast European network. When Bredin Prat recently advised Danone on its $17 billion offer for the Dutch baby food group Royal Numico, it worked with its best friend in the Netherlands, De Brauw Blackstone Westbroek.

“France has the highest concentration of British and American firms in Europe,” said Patrick Dziewolski, 37, a partner at Bredin Prat. “But to practice French law, they hire French lawyers.”

Perhaps the most aggressive hunter has been Latham & Watkins, of San Francisco, which devised an international expansion strategy with McKinsey in the late 1990s, then began talks in 2002 with Ashurst of Britain about a merger, which failed. Hardly had the dust settled on those talks when Latham hired away Ashurst’s entire private equity team in Paris, then it proceeded the following year to raid Ashurst’s Munich office. Last year, Latham snatched up Gaby Eickstädt of Ashurst, one of Germany’s leading antitrust experts. Earlier, the firm pulled off perhaps its biggest coup, hiring 95 lawyers from the Paris office of Stibbe, a law firm based in Amsterdam.

Did French lawyers joining Latham suffer culture shock? “I don’t think so,” said Olivier Delattre, a former Stibbe lawyer who is now a Latham partner. “Most were with American experience, everyone knew that Americans work hard, and about time sheets, but there were no major problems.”

Asked to cite deals that Latham could not have handled without its French lawyers, John D. Watson Jr., a Latham partner who engineered much of the growth, said that Latham had advised KB Home, from its own California backyard, when KB sold its French subsidiary, Kaufman & Broad, to a French buyout firm for $812 million in May. In June, he said, Latham advised the British private equity firm BC Partners when it acquired Intelsat, the world’s biggest commercial satellite operator, in a deal worth about $5 billion. Latham’s role would have been “unimaginable,” he said, without its French presence.

Mr. Martel of Orrick agreed that local law continued to be critical. “French law is going to matter — corporate law, right of ownership,” he said. “You need experienced French lawyers who are prepared to deliver the law as the client needs it.”

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